November didn’t waste any time with big news stories featuring oil issues, and some of us are still trying to catch up on the sleep lost watching the outcomes of the US elections on November 4. Looking ahead and around the globe, it appears the rest of the month has plenty of potential to keep us guessing as to what will happen to the global oil industry.
For this month’s The Oil Big Five, we’re marking our calendars for the rest of November and eagerly awaiting what new developments could start emerging. These five topics were suggested by our Platts editors and analysts around the world, and we’re particularly interested in what you think. Any wagers as to the outcome of any of these topics, or any other issues that are especially important to you? Comment here or on Twitter with the hashtag #oilbig5, and we’ll feature your comments (and give you another chance to leave us your thoughts) later in the month.
Without further ado, our top global oil topics for November:
1. OPEC’s November meeting
OPEC is having its meeting on November 27, which gives us a few weeks to speculate about what will come out of it. Plummeting oil prices are impacting every region, and several big oil producers have budgeted on $100/b oil for the year, a far cry from the current crude market. If OPEC and its juggernaut Saudi Arabia want to support those kind of prices, it would require a cut to production, but if the Saudis are amenable to a price closer to $90/b, then there’s less of a chance of an official cut to output. Venezuelan foreign minister and former oil minister Rafael Ramirez tried without success to call an OPEC meeting to address the price plunge in October, which seems to illustrate that the November meeting will be that much more important.
2. Iran’s oil production in light of nuclear talks
Also in November, US Secretary of State John Kerry, Iranian counterpart Mohammad Javad Zarif and outgoing EU foreign policy chief Catherine Ashton will have closed meetings to discuss Iran’s nuclear program and the economic sanctions on the country. Under an interim deal reached in late November 2013, Iran agreed to halt nuclear enrichment activities in return for $7 billion in frozen oil revenues. The oil and financial measured imposed by the US and EU have impacted Iran’s crude output and exports, not to mention its oil revenue. Will Iran emerge from the talks with the ability to return to its former production levels, or will the sanctions and other barriers remain in place?
3. China’s role in Middle East spot crude trading
October was an historic month in Middle Eastern spot crude oil markets, with all-time peaks in trade volumes observed during the Platts Market on Close assessment process. Chinaoil, the trading arm of PetroChina, bought a record 1,005 cash Dubai partials in October, making the company the most active participant in the Platts Dubai MOC assessment process in 2014. As of the end of October, Chinaoil traded 44.02 million barrels in the Dubai MOC, handily topping the 29.23 million barrels traded by Shell and 24.95 million barrels traded by Vitol. Unipec, the trading arm of Sinopec, traded 22.93 million barrels in the year to October 31, according to Platts data, further cementing China’s role in the trading landscape. Traders said Chinaoil’s buying is likely related to taking advantage of cheap crude to fill China’s Strategic Petroleum Reserve sites, but the combined activity shows Asia’s increasing role in crude markets. Will the buying continue into November?
4. The future of Indonesia’s fuel subsidies
President-elect Joko ‘Jokowi’ Widodo faces a daunting task in Indonesia: Can he and his team override vested interests and parliamentary opposition to push through unpopular reductions to the country’s fuel subsidies? Fuel and biodiesel subsidies have been raised to Rupiah 276 trillion for Indonesia’s 2015 budget, up from roughly 246.5 trillion allocated in 2014, a signal that no major price hikes are expected immediately and overall subsidy cuts will come from electricity tariff hikes instead. But an advisor on Jokowi’s transition team said the new leader plans to raise subsidized fuel prices by Rupiah 3,000/liter beginning in November to avoid a state budget deficit expected to reach Rupiah 27 trillion, and inflation accelerated faster than expected in October on expectations of a fuel price hike. The government had to abandon plans for a 33% price hike in April 2012 due to protests and a lack of parliamentary support; will Jokowi stick to his stance and be able to overhaul a system that could point more money toward infrastructures and education instead?
5. Republicans take back the US Congress
Speaking of national leadership, the US held midterm elections on the first Tuesday of November. The Republicans indisputably had a better outcome, but what’s still debatable is whether having them take over Congress will have big impacts on energy topics, and in particular oil. Republicans still lack the votes to overcome a Senate filibuster on a party-line basis and the majority needed to override a veto from President Barack Obama. Hot-topic issues like approving Keystone XL could now be more likely, but exporting crude oil could still be limited based on public perceptions. If you want to make a guess as to what sort of impact the new Congress could have on the US oil industry (and, in turn, the role of the US in the global oil landscape), leave us your thoughts in the comments.
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